More than four years after the financial crisis, it is increasingly clear how traumatized individual investors were by the market volatility of those years and the portfolio losses they suffered. Its also clear how difficult it will be for advisors and other financial professionals to help these clients take steps to act in their own best interests. But, now is the perfect time for advisors to re-engage with clients, to reflect on past experience and look for innovative ways to build more durable portfolios.
Industry data shows the depth of the trauma suffered by investors. In 2008, the Standard & Poors 500® Index lost 37 percent, knocking many investors portfolios down significantly. Since the market reached its low point, its been up by 129 percent on a total return basis. Despite these returns, investors have withdrawn more than $265 billion from domestic equity funds since that time. Though flows to equity funds show early signs of reversing in 2013, many investors remain overly allocated to cash and other low-return instruments.
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